The University's endowment has remained steady at around $3.4 billion despite economic hardships over the past year, officials announced at yesterday's Board of Trustees Executive Committee meeting.
Its value decreased by 3.9 percent in the last quarter of Fiscal Year 2002, which ended June 30, but showed a 0.1 percent improvement overall, according to Vice President for Finance and Treasurer Craig Carnaroli. In comparison, the benchmark figure for the fiscal year was down 6.7 percent.
Administrators noted that Penn's endowment has fared well compared to many of its peer institutions because of the University's conservative investment practice. While the endowment failed to meet expectations for a few years during the last decade's bull market, it has now outperformed in the past year's economic downturn. Overall, the endowment has seen a 10.5 percent increase over the last decade.
"We invest in a style that was not in favor in the late '90s," Trustees Chairman James Riepe said. "Now that the markets are adjusting downward, our stable approach is paying off. We expected to do well in this environment."
The University's total net assets -- excluding the University of Pennsylvania Health System -- reached $4.7 billion in FY 2002, representing a 2.0 percent increase. The University and its Health System's combined net assets grew by 2.4 percent.
Overall revenues increased by 5.4 percent in FY 2002, while expenses grew by 6.7 percent. Both of those figures were 2.6 percent higher than had been budgeted, according to Vice President of Budget and Management Analysis Michael Masch.
He added that salary increases accounted for 45 percent of the rise in expenses, and employee benefits accounted for 33 percent. Tuition and fees was a major factor contributing to the increase in revenue.
"We actually did significantly better than the budget," Masch said.
The Health System had a $27.3 million operations income, marking its third consecutive year of financial improvement, according to Chief Financial Officer Peter DeAngelis. But it was only the second year that the beleaguered system has seen positive revenues, Carnaroli said.
DeAngelis added that the Health System's liquidity saw a $31.2 million improvement.
Administrators said they were encouraged by the preliminary reports, especially in a year when many colleges and universities have experienced huge decreases in their endowment.
"Generally, I'm pretty pleased with the results because we were in some fairly uncertain times with regard to the economy and with regard to the financial markets," Carnaroli said. "There are others who will go through difficult times... we did pretty well."
Harvard University's endowment -- which, according to the World Bank, is larger than the gross national products of more than half the countries in the world -- also remained fairly steady, falling 4 percent to $17.5 billion due to increased spending. Its investments decreased 0.5 percent during FY 2002.
Carnaroli said administrators are "cautiously optimistic" that the Penn's FY 2002 endowment performance will be among the top five in the country.
At yesterday's meetings, University President Judith Rodin summarized the University's endeavors over the past year, including the appointment of a new executive vice president, Penn's jump to fourth place in the U.S. News and World Report college rankings, the opening of the Sadie Alexander elementary school and the filling of retail vacancies on Walnut Street.
"I think we are all witnesses to a really remarkable time in the University's history, and I must say that I'm honored to be President," Rodin said.
Provost Robert Barchi lauded Penn's number one ranking in community services education, the accomplishments of the Graduate School of Education and Nursing School and the full capacity of the college houses.
Health System Chief Executive Officer and Medical School Dean Arthur Rubenstein praised the increasing diversity in the Medical School and noted that while it is two-thirds along in its strategic planning, the most difficult task will be to align finances with strategic goals.
The executive committee also passed several resolutions for faculty and board appointments.
The Associated Press contributed to this report.
